DECEMBER 20, 2010, 12:48 P.M. ET.

Apax Nears $1.7 Billion Takko Deal


Apax Partners is nearing a deal to acquire German clothing retailer Takko for roughly €1.3 billion ($1.71 billion), people familiar with the matter said, in the U.K. private-equity firm's latest big-ticket purchase from a rival buyout firm.

Apax has entered exclusive talks with Takko, a so-called value fashion retailer which is currently owned by U.S. private-equity house Advent International. The exclusivity period lasts through Thursday and a deal is likely by then, one of the people said.

Advent has simultaneously been considering an initial public offering of Takko, and a share sale could still go forward if Apax doesn't seal a deal. The discount retailer operates 1,412 stores across Europe, the Benelux region and Eastern Europe, and has roughly €900 million in annual sales and more than 10,000 employees. It has been opening new stores at a rapid clip, and has benefitted from belt-tightening among German consumers as the outlook for economic growth in Europe remains tepid.

Should Apax agree to buy Takko, it would be the second so-called secondary buyout by the firm that has surfaced in recent days. Apax, one of the biggest private-equity firms in Europe, entered exclusive talks to buy Danish cleaning giant ISS Holding from the buyout arm of Goldman Sachs Group Inc. and EQT, another private-equity firm, people familiar with the matter said earlier this month. That deal could be worth $8.5 billion including debt. In the auction, Apax edqed out rivals EQT, TPG Capital and French private-equity house PAI.

Such secondary sales have gained increasing prominence of late as private-equity firms look to deploy mammoth cash hoards following a drought in leveraged buyouts, and at the same time sell out of investments made during the deal boom. But the practice has raised eyebrows among some investors in private-equity funds who see such deals as little more than a way for buyout firm officials to garner fees for themselves, in an exercise sometimes referred to as "pass the parcel."

Advent itself bought Takko from Permira, another private-equity firm, in 2007. According to a recent Morgan Stanley analysis, Apax has $9 billion of so-called dry powder, or cash available to do deals.

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